The Effects of the ECBâ€™s Unconventional Monetary Policy on the Non-Euro Area EU Member States

Abstract:
The paper examines the unconventional monetary policy programs and measures, implemented by the European Central Bank (ECB). The research is focused on covering their effects on the non-Euro Area Member States of the European Union (EU). The main purpose of the paper is to conduct an econometric study on the effects of the ECBâ€™s non-standard measures on the government bond yields of the countries, part of the EU, but outside the Eurozone, through the interest rate channel of the monetary policy transmission mechanism. The study is dedicated to the empirical study on the dynamics and the relations between the key interest rates and the government bond yields of Bulgaria, Denmark, United Kingdom, Poland, Romania, Croatia, Czech Republic and Sweden. The observed period spreads from January 2010 to December 2016, with the use of monthly data. The aggregated results from the constructed econometric models for the non-Euro area EU Member States show that between 95% and 98,5% of the changes in the government bond yield can be explained by the changes in the levels of the Euro Over Night Index Average(EONIA) - an interest rate factor, and by the time â€“ the second factor in the model. The results also show that at EONIA fixed rates the yield on the long-term government bonds can vary from -0,025 percentage points to -0,068 percentage points monthly. Conclusions and proposals are made, concerning the interest rates in the Eurozone and in the EU, in the context of the unconventional monetary policy, conducted by the ECB â€“ one of the worldâ€™s major central banks.